February Plunge of 12% as AI Spending "Drags Down" Amazon Stock Price

E-commerce and cloud computing giant Amazon’s stock price plummeted 12% in February, marking its worst monthly performance since December 2022. Analysts believe that the recent weakness in Amazon’s stock is largely due to its early February earnings report, in which the company announced plans to invest $200 billion this year in data centers, chips, and other equipment to expand computing power—far exceeding market expectations—and which also dragged down its operating profit guidance. However, some Wall Street experts see Amazon Web Services (AWS) as an “undervalued generative AI winner,” with demand for cloud computing services continuing to be a key growth driver. This pullback may actually present a potential buying opportunity for investors optimistic about the long-term returns of artificial intelligence (AI).

Cash Flow Turns Negative for the First Time in Recent Years

E-commerce and cloud computing giant Amazon’s stock price plunged 12% in February, marking its worst monthly performance since December 2022.

Moreover, last month Amazon was also the worst performer among the so-called “Magnificent Seven” U.S. stocks and one of the 40 worst-performing companies in the S&P 500. Since 2025, Amazon has only gained 5.2%, the lowest among the seven giants.

The recent decline in Amazon’s stock is largely attributed to its early February earnings report. The company announced plans to invest $200 billion this year in data centers, chips, and other equipment to expand computing capacity—far surpassing market expectations—and which also negatively impacted its operating profit guidance. This news overshadowed the highlight of AWS’s fastest quarterly growth in over three years.

Data shows that, due to these expenditures, Amazon’s free cash flow is expected to be negative $524.2 million in 2026, marking its first negative cash flow since 2022. In comparison, the company’s free cash flow in 2025 was $7.7 billion.

Additionally, Amazon’s return on invested capital (ROIC) in Q4 last year was 12.4%, down from 14.8% two quarters earlier, which was the highest level since 2011.

Massive capital expenditures are not only eroding Amazon’s free cash flow, but market professionals are also growing impatient about when these investments will generate significant returns. As Wall Street becomes increasingly cautious about the company’s aggressive spending plans, market sentiment has cooled.

Vaughan Nelson Investment Management Vice President and Fund Manager Adam Rich said, “Amazon is starting to look like a cautionary tale because of its high investment scale but the lowest returns among large tech companies. Current growth is insufficient to justify higher capital expenditures.”

However, AI investments are changing market perceptions of the tech giants’ cash flow capabilities. Jeff Buchbinder, Chief Equity Strategist at LPL Financial, noted in a February 12 report that as AI capital spending becomes a long-term theme, investors will pay closer attention to companies’ guidance on free cash flow prospects. He also added that market consensus still points to “positive but volatile cash flow growth.”

Long-Term Growth Remains Strong

Despite recent poor stock performance, many analysts still believe that these investments will drive future growth.

Some Wall Street experts see this correction as an opportunity for investors optimistic about the long-term returns of AI.

Morgan Stanley analyst and head of technology research Brian Nowak previously warned clients that Amazon itself has a strong business that can directly benefit from capital expenditure expansion—namely, Amazon Web Services (AWS).

Nowak described AWS as an “undervalued generative AI winner” and emphasized that demand for cloud computing services continues to be a key growth driver for the company.

He also pointed out that, like other cloud providers, Amazon is still capacity-constrained. Continuing to expand data centers to meet growing demand will further boost growth, but will also require significant capital investment. “For this reason, we remain optimistic about AWS’s accelerated capital expenditure,” Nowak wrote. He has a “buy” rating on Amazon with a target price of $300, implying more than 45% upside from current levels.

Overall, Wall Street remains relatively optimistic about Amazon. According to FactSet, out of 72 analysts covering the stock, 66 have a “buy” rating, only 6 recommend “hold.”

William Blair analyst Dylan Carden pointed out that Amazon’s deal with OpenAI justifies the $20 billion investment, as AWS is rapidly expanding to support this major new client.

In addition to the deal with OpenAI, Amazon has been active in AI investments recently.

On March 2, U.S. time, George Washington University announced that Amazon had invested $427 million to acquire the university’s Virginia Science and Technology Campus in Ashburn, Virginia, to accelerate AI infrastructure development. The campus will include a data or information technology center.

According to Reuters on March 2, Amazon also announced plans to invest an additional €18 billion (about $21 billion) in Spain to expand data centers and promote AI innovation, bringing its total investment in the country to €33.7 billion. Amazon’s Chief Global Affairs and Legal Officer David Zapolsky said this investment will support up to 30,000 jobs through 2035.

“Through this investment, we aim to make Spain our AI operations hub in Europe,” he said.

Yuan Shuai, co-founder of New Think Tank New Quality Productivity, believes that Amazon’s stock price plunge in February is unlikely to be a long-term trend, but rather a short-term market sentiment release. The core reason for the decline is that the $200 billion capital expenditure far exceeded market expectations, causing concerns about short-term profitability. However, the main purpose of this $200 billion investment is to establish a dominant position in AI infrastructure, building a comprehensive ecosystem covering cloud services, smart logistics, and cutting-edge technologies. Moreover, facing equally aggressive AI investments from competitors like Microsoft and Google, Amazon must sustain large-scale capital spending to maintain technological iteration speed and avoid falling behind in the AI era. The long-term goal is to create a stable, predictable profit growth curve through technological advantages.

Besides AWS, investors have other reasons to remain bullish on Amazon.

The agreement with OpenAI includes using Amazon’s proprietary Trainium chips to validate the business. Amazon is also a long-term investor in the AI star company Anthropic. Additionally, Amazon is actively deploying robotics in its warehousing and logistics network, which is expected to further improve efficiency.

For these reasons, despite recent stock price weakness, Amazon remains a Wall Street favorite. Of the 83 analysts covering the company, 78 have a “buy” rating, 5 recommend “hold,” and none suggest “sell.” The average target price over the next 12 months is $282.65.

Parnassus Investments fund manager Andrew Choi said, “Among the ‘Magnificent Seven,’ Amazon might be the most attractive stock opportunity.”

He added, “It’s growing rapidly and has a low valuation. Although it is in an investment cycle, if it ends up overspending, the company can always slow down, and we will see cash flow rebound. No matter how you analyze it, it looks very attractive.”